Undercut & Rally: The Dip Under a Prior Low Before AppLovin's 2024 Run and GE Aerospace's 2025 Rally

On August 5, 2024, the day a global sell-off sent Japan's Nikkei down 12.4%, AppLovin opened 9.6% lower, dipped under its March low and closed back above it. Bought at that close with a stop under the day's low, the trade risked 9.6%. By October 29 the stock was up 156.5%, without a single gap of 5% or more.

On April 7, 2025, the Monday after the tariff crash, GE Aerospace undercut its December low on 3.5 times its usual volume and closed back above it. The risk was 5.0%. By September 23 the stock was up 82.2%, again without a 5% gap.

Neither stock has traded below its undercut's low since. Here is how to read an undercut & rally, where the stop goes, and how to find the next one.

What $10,000 became#

Prices are split-adjusted, as on the chart. AppLovin's 120-session figure includes its 36.5% earnings gap of Nov 7, 2024, about a fifth of the run. Its first 60 sessions had no gap of 5% or more, and neither did GE Aerospace's 120.

The undercut & rally in one table#

An undercut & rally is a dip under an earlier swing low that closes back above it. Stops and sell orders sit under an obvious low. Price runs through them, the selling dries up, and the close lands back above the line.

These are the rules the VCP Scanner terminal uses to name an undercut & rally on a daily chart.

Colour and shape do not matter. AppLovin's rally day was green and closed 80% of the way up its range. GE Aerospace's was green too and closed 52% of the way up, just inside the rule.

The level is the pattern. Unlike a hammer or an engulfing, an undercut & rally cannot happen anywhere: it needs a prior low to undercut.

Undercut & rally and what does not count#

The rally day often carries a candle name too. A hammer, a bullish engulfing or a dragonfly doji that closes back above a prior low is an undercut & rally as well. Goldman Sachs's Oct 30, 2020 dragonfly was one.

Example 1: AppLovin (APP) on the global sell-off day, Aug 5, 2024#

Open APP in the VCP Scanner terminal →

Aug 5, 2024 was the global sell-off: the Nikkei had its worst day since 1987 and the S&P 500 fell 3.0%. AppLovin's low was its lowest price since March, 34.0% under its Jul 5 high of 91.91. It still closed 2.3% down on the day, but back above the March low, and that close is what the terminal reads.

The other dot in the chart, on Jul 25, is an earlier undercut & rally, of the Jun 21 low at 75.13. Its stop at 73.08 broke on Aug 2, the session before. The stop decides which one you are still holding.

What followed:

• Next session (Aug 6): closed at 69.00, +2.8%, already the first close above the day's high of 68.72.
• Ten sessions later (Aug 19): 85.82, +27.8%.
• Sep 16: 116.25, its first close above its Nov 2021 record close of 114.85.
• Oct 29: 172.24, +156.5%, with no gap of 5% or more on the way. That is 16.2 times the 6.47 risked on each share.
• Nov 7: up 46.3% on the day after its third-quarter report, from a 36.5% gap at the open.
• Dec 6: 401.50, +498.0%, 51.7 times the risk.
• The low of 60.67 was never broken. AppLovin's lowest price since that day is 66.16, on Aug 8, 2024. On Nov 3, 2026 it closed at 245.51, 265.7% above the rally day's close.

With $500 at risk, the stop sized the trade at 77 shares, about $5,170. At the Dec 6, 2024 close those shares were up $25,746.

Example 2: GE Aerospace (GE) at the tariff low, Apr 7, 2025#

Open GE in the VCP Scanner terminal →

GE Aerospace fell 6.1% on Apr 3 and 11.1% on Apr 4, the two sessions after the tariff announcement. On Apr 7 a false report of a tariff pause swung the whole market, and GE traded from 159.36 to 175.34 before closing at 167.70, back above its December low. Its low was 25.6% under its Mar 26 high of 214.21 and its lowest price since August 2024.

What followed:

• Next session (Apr 8): closed at 169.37, +1.0%.
• Two sessions later (Apr 9): 187.27, +10.6% on the day the 90-day tariff pause was announced, the first close above the rally day's high of 175.34.
• Ten sessions later (Apr 22): 189.18, +12.8%.
• Jun 30: 257.39, +53.5%.
• Sep 23: 305.63, +82.2%, with no gap of 5% or more on the way. That is 16.5 times the 8.34 risked on each share.
• The low of 159.36 was never broken. GE Aerospace's lowest price since that day is 165.70, on Apr 9, 2025. On Nov 3, 2026 it closed at 320.67, 91.2% above the rally day's close.

With $500 at risk, the stop sized the trade at 59 shares, about $9,894. At the Sep 23, 2025 close those shares were up $8,138.

Where an undercut & rally counts: key levels#

The undercut & rally is the one name that is a level by definition: it is always at a prior low. In the terminal it shows with Only at a key level on, which is the default, and the inspector reads "at a prior low".

Both examples were in Stage 2, Stan Weinstein's advancing stage: the stock above a rising 30-week average. The terminal skips undercuts in Stage 4, the declining stage.

How to trade an undercut & rally#

1. Mark the low. Find a clear earlier swing low that price is coming back to, like AppLovin's March 2024 low and GE Aerospace's December 2024 low.
2. Watch the close. The dip under the low is the setup; the close back above it, in the upper half of the day's range, is the signal. A close under the low for three sessions, or a dip of 1.5 ATR or more, is a break.
3. Choose your entry. Some traders buy the rally day's close. Others wait for a close above its high. AppLovin gave that close the next session and GE Aerospace two sessions later.
4. Put the stop under the undercut. Under the lowest point of the dip, the terminal's "low, test included". When the rally comes a day or two after the undercut, that low can be an earlier day's.
5. Size from the stop. Shares = money at risk ÷ (entry − stop). With $500 at risk on GE Aerospace: 500 ÷ (167.70 − 159.36) = 59 shares.

Find undercut & rallies on any chart in VCP Scanner#

• Open a stock in the terminal, for example APP or GE.
• Open Candles in the chart toolbar and tick Undercut & rally, or use the Reversals quick pick for every classic reversal.
• Only at a key level is on by default, and every undercut & rally passes it.
• The chart jumps to the latest undercut & rally. A dot marks each one under its low, and the selected one shows its level and stop on the price scale.
• The inspector lists the date, close, stop, risk to stop, level, volume and stage. Walk through the others with the ← and → keys.
• Mark the ones you care about with the drawing tools. The arrows in the charts above are the Arrow Marker (Alt+A): click where the arrow starts, then click the candle.

Candles are free, on daily, weekly and monthly charts.

Bottom line#

• An undercut & rally is a dip under an earlier swing low that closes back above it, the same day or within two sessions.
• AppLovin's came on the Aug 5, 2024 sell-off and GE Aerospace's at the April 2025 tariff low. They risked 9.6% and 5.0%; AppLovin rose 156.5% within 60 sessions and GE Aerospace 82.2% within 120, with no 5% gap in either stretch.
• The undercut's low is the stop. It defines your risk before you take the trade.

Data: VCPScanner daily market data through Nov 3, 2026, split-adjusted. The examples are for education, not recommendations.